From Bruce Webb in comments:
Economics does not have good answers about equitable solutions because that is not the question they are asking themselves. If efficiency is the starting point then Free Trade based on Ricardian Comparative Advantage becomes a slam dunk winner. Once you define efficiency as GDP without attention to distribution. And if you combine this approach from efficiency with the belief that labor is always and everywhere fully compensated at its level of marginal production then it is no wonder economists shake their heads at being so misunderstood. Given the problem they have set themselves out to solve and given their assumptions on compensation the rest follows.
Which is fine but also a reason to keep these guys far away from the policy shop, the real world has a power component that their models simply don't accomodate, pricing power exists in many forms and arguing for a particular trade policy from within a framework that does not fundamentally acknowledge that is simply to play into the hands of the people who in fact exercise that pricing power.
...[Economists] start from the premise that there is no fundamental struggle between workers and capital, they assume that markets will somehow deliver equitable solutions or worse not even consider that a useful question. Whereas if you start from the position of equity, of rationally dividing returns on productivity by actual contribution to production you may not in fact reach the most efficient result.
Bruce's point on power is particularly important. One reason many political observers dismiss certain strains of economic thought is that too much else is held equal, including political, social, and financial power. I had dinner with a prominent economist recently, and I brought up Krugman's line that economists haven't yet figured out how to incorporate power into their models. My friend smiled, and said, "when someone models it, I'll take it into account." Well, great, but people are listening to you now.
